Report for the Iron Ore Mining Investment in the Democratic Republic of Congo
Report for the Iron Ore Mining Investment in the Democratic Republic of Congo
To: The Board of Directors of Rio Tinto
From: Senior Analyst
Date: 05.05.2010
Content
1. Executive Summary 3 2. Introduction 4 3. Discussion 5 4.1. Economic Risk Assessment 5 4.2. Sources of Financing 8 4.3. Repatriation Issues 11 4.4. Strategies for Expropriation situations 15 4. Conclusion 18 5. Appendices 19 6. References 20
1. Executive Summary
Iron ore mining is a growing industry within the African region and when compared to the global leaders, the Chinese, Australian, and Brazilian mining industries the size of the African industry is very small. However countries like the Dominican Republic of Congo are rich with iron deposits and have the potential to be significant players within the market.
This report focuses on highlighting the key economic risk factors of the Democratic Republic of Congo considering the political variables, economic factors and the financial status of its economy, and to identify the impact it would have on a potential Iron ore mining investment by the International Mining Company Rio Tinto. The risks associated with shipping from the country are also identified due to its importance in the mining industry. Further the main sources of finance available for the investment are discussed in relation to the methods Rio Tinto normally uses to finance its foreign direct investments. Repatriation of funds being a key area of importance in investment decisions, the impact taxation, CSR and local environmental expenses may have on this is evaluated. Considering the political climate of the DRC, expropriation of assets and licences are a threat most investors may have to face. This report identifies strategies the company could adopt in such a situation.
2. Introduction
Rio Tinto is a British-Australian listed mining
To: The Board of Directors of Rio Tinto
From: Senior Analyst
Date: 05.05.2010
Content
1. Executive Summary 3 2. Introduction 4 3. Discussion 5 4.1. Economic Risk Assessment 5 4.2. Sources of Financing 8 4.3. Repatriation Issues 11 4.4. Strategies for Expropriation situations 15 4. Conclusion 18 5. Appendices 19 6. References 20
1. Executive Summary
Iron ore mining is a growing industry within the African region and when compared to the global leaders, the Chinese, Australian, and Brazilian mining industries the size of the African industry is very small. However countries like the Dominican Republic of Congo are rich with iron deposits and have the potential to be significant players within the market.
This report focuses on highlighting the key economic risk factors of the Democratic Republic of Congo considering the political variables, economic factors and the financial status of its economy, and to identify the impact it would have on a potential Iron ore mining investment by the International Mining Company Rio Tinto. The risks associated with shipping from the country are also identified due to its importance in the mining industry. Further the main sources of finance available for the investment are discussed in relation to the methods Rio Tinto normally uses to finance its foreign direct investments. Repatriation of funds being a key area of importance in investment decisions, the impact taxation, CSR and local environmental expenses may have on this is evaluated. Considering the political climate of the DRC, expropriation of assets and licences are a threat most investors may have to face. This report identifies strategies the company could adopt in such a situation.
2. Introduction
Rio Tinto is a British-Australian listed mining
References: David Eitman,Arthur Stonehill & Micheal Moffet (2010) Multinational Business Finance 12th Edition John Ogilivie Christine Parkinson (2006) Management Accounting Financial Strategy CIMA Annual Report of Rio Tinto (2009) Bureau of Economic, Energy And Business Affairs (2010) US Department of State http://www.state.gov/e/eeb/rls/othr/ics/2010/138056.htm (used for the economic assessment) Data Bank (2009) The World Bank ttp://databank.worldbank.org/ddp/editReport?REQUEST_SOURCE=search&CNO=2&country=ZAR&series=&period= (used to obtain financial data) Rio Tinto Official Web site http://www.riotinto.com/ Country Brief Democratic Republic of the Congo (2009) EStandardsForum Financial Standards Foundation Stanford Graduate School Of Business (2007) Global Supply Chain Management Forum - Rio Tinto Iron Ore Challenges of globalization in the Mining Industry. The African Economic Outlook (2009) http://www.africaneconomicoutlook.org/en/countries/central-africa/congo-democratic-republic/ Scribid (2010) http://www.scribd.com/doc/31426960/Sources-of-finance Investopedia http://www.investopedia.com/terms/s/syndicatedloan.asp Expropriation News Editor (2010) FDI Uptick Highlights Expropriation Risk, says MIGA- Expropriation News http://expropriationnews.com/